MILAN, July 31 (Reuters) - With the ink barely dry on its
bailout plan, Italian bank Monte dei Paschi di Siena
faces a Herculean task convincing investors to back a third
recapitalisation in as many years and avert a banking crisis
that would send shockwaves across Europe.

To stave off the risk of being wound down, the world's
oldest bank hastily unveiled the private sector-backed rescue
blueprint late on Friday. It came just hours before the lender
emerged as the worst performer in European stress tests that
showed its capital would be entirely wiped out in a severe
economic downturn.

The plan aims to clean up and bolster the bank's balance
sheet once and for all, restoring to health a lender whose
frailty threatens the wider Italian banking system, the savings
of thousands of retail investors and the increasingly weak
political standing of Prime Minister Matteo Renzi.

A financial crisis in the euro zone's third-biggest economy
would also risk creating contagion across Europe, a region
already reeling from Britain's decision to leave the EU.
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